Monday, March 9, 2009 0 comments ++[ CLICK TO COMMENT ]++

More than $50 trillion in financial wealth wiped out

The Asian Development Bank estimates that more than $50 trillion in financial wealth in stocks, bonds, ABS, and other financial assets has been lost (you can access the source document here):

The global crisis wiped a staggering $50-trillion (U.S.) off the value of financial assets last year including $9.6-trillion of losses in developing Asia alone, the Asian Development Bank said Monday.

“This is by far the most serious crisis to hit the world economy since the Great Depression,” said ADB President Haruhiko Kuroda. But he predicted Asia would be “one of the first regions to emerge from it.”

A study commissioned by the Manila-based lender on the impact of the financial crisis on emerging economies estimated the value of financial assets worldwide — currency, equity and bond markets — to have dropped by $50-trillion in 2008.

It said developing Asia — losing the equivalent of just over one year's worth of gross domestic product — was hit harder than other emerging economies because the region has expanded much more rapidly.

In Latin America, losses were estimated at $2.1-trillion. There were no comparable figures for other regions.

To make matters worse, in addition to the $50 trillion losses in 2008, I would estimate that several trillion more have been lost in the three months of 2009 alone. My guess is that some of the losses are due to irrational pricing (arising from panic and forced selling) so some of it will be recouped. Nevertheless, total losses will be in the tens of trillions. This is one big reason I have a hard time supporting the inflationist view. All these losses will exert deflationary pressure.


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